For Tim Morton, managing the portfolios of high and ultra-high net-worth clients is all about focus, particularly when it comes to his investment approach and the number of clients with whom he chooses to work.

“Wealthy clients need someone who is going to pay them an awful lot of attention,” says Morton, an investment advisor and first vice president with CIBC Wood Gundy in Toronto. “They don’t want you to have too many relationships.”

Last month, Morton cut down his list of client families for the third time in the past eight years, this time to 30 clients from around 60. He also reduced his advi-sory team to three people, including himself, from six. Despite the limited number of client families, Morton, who spoke about his advisory business at the 2008 Top Advisor Summit in Toronto in June, manages some $540 million in assets.

Fifteen of his 30 clients represent very large accounts; they are mostly wealthy, retired industrialists, he says. The other 15 are large legacy accounts, including family and friends, with whom he has dealt for 20 to 25 years. “I feel I have an obligation to look after them,” he says, “even though they might not be the type of account I would go after today.”

A native of Toronto, Morton, 53, has been in the financial advisory business for 30 years, starting in 1978 with Burns Fry Ltd. and moving on to a number of other brokerages. In 1990, he joined Midland Walwyn Capital Inc., which was later swallowed up by Merrill Lynch Canada Inc., which in turn was absorbed by Wood Gundy. As well as working as an advisor, Morton is also serving as chief portfolio manager for Wood Gundy on an interim basis.

Morton focuses his practice on his clients’ investment needs rather than offering other financial planning services. “The type of clients I’m dealing with have had everything really organized, on a financial planning basis, for 10 or 15 years already,” he says. “They have superb accounting and legal specialists — and everything else. By the time they get to me, it’s pretty well straight investing.”

Morton favours employing third-party money managers. He closely supervises the performance of those managers and any other outside money management with whom his clients have established relationships over the years.

“I do the research and report back to them on the success of those other managers,” says Morton, who compiles a highly detailed, customized report for each client, listing their total holdings. “They’re looking at me, from a global picture, as the main person who puts it all together.”

In 2000, after years of building up his book to 500 clients, $700 million in assets under management and a staff of 10, Morton began considering cutting down the number of clients he served. He wanted to serve a smaller number better, maximize the use of his time and slowly shape his book to fit his lifestyle.

“[Reducing the number of clients] is not driven solely from a business perspective,” Morton says. “After 30 years in the business, I feel I’ve earned the right to deal with the people I personally want to deal with, people who have similar thoughts to investing or similar temperament to mine. It gives me more flexibility, from a personal standpoint.”

Trimming the book has been a gradual process. Starting in 2000, Morton reduced his book of business to 200 clients from 500, then to 60 from 200, and finally down to 30. Some advisors who were on his team have assumed responsibility for some of the departing clients, while other advisors have struck out on their own.

Morton admits that reducing a client list comes with risks. Dropping a client family means losing any lucrative referrals that the client might bring. Also, when you reduce a client list to a small number, any client who later chooses to leave you represents a greater hit to your bottom line, because each client represents a larger portion of your total AUM.

“You have to have enough financial comfort to wind down the size of your business — at least, temporarily,” Morton says. “If you’re 25 years old, that’s really tough. But if you’re 53, you might be able to do it.”

It’s important for each advi-sor, Morton says, to find his or her own “sweet spot”: the ideal amount of average AUM, minimum new account size and number of clients that will work best with the advisor’s skill set, personality and preference.

@page_break@Morton’s ideal account size — his sweet spot — is in the $5-million to $35-million range. Clients with more use a different level of service, he says: “When clients get to the range of $50 million to $100 million, they would probably have a family office set up independently.”

Over the past eight years, Morton has raised his minimum new account size to $1 million from $250,000, then to $5 million and finally to $10 million.

“I learned, as I went up [through] those various levels, what people were looking for,” he says, “how to deal with them, how to report to them and what kinds of investment products and volatility they could deal with.”

High net-worth clients tend to be conservative investors, Morton says. They look for absolute returns — 6% to 7% every year, regardless of what the overall market is doing — rather than relative returns. They’re not as interested in generating income or high growth as they are in reducing volatility.

“What they tell me is: ‘I’ve made an awful lot of money, Tim, what I don’t want is sleepless nights’,” he says.

Morton’s compensation is mostly fee-based compensation, with some transaction-based compensation, depending on the products in a client’s portfolio. How much he charges, Morton says, is rarely an issue for his clients. “They’re all self-made, they’re all good decision-makers and they’re prepared to pay the proper amount for the services rendered, because that’s what they would expect,” he says. “They want to make sure I’m compensated well enough that I’m paying attention.”

In recent years, Morton has put more of his clients’ assets into hedge funds, looking for ways to achieve that absolute return his clients want. He says the chartered financial analyst designation he earned 10 years ago has helped him, especially when communicating with hedge fund and other third-party managers.

Now that Morton is down to 30 clients, he will be looking to add another 10 or so whose investible assets are more than his minimum account size of $10 million. In January 2009, his son Daniel, 21, will be joining the advisory team. Morton and his wife Inese also have an older son, James, 26.

But even if Morton adds 10 clients, he isn’t likely to grow his client list to any great number. That’s because he’s interested in working for a group of client-families who fit well with his personal vision of how to run a business.

“It’s really more a lifestyle thing for me,” Morton says. “Who are the people who don’t mind if I call them from the cottage, who couldn’t care less because they themselves are never in one place for more than a day? Maybe, as you age in this profession, you become more similar to the client.” IE

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